We have received questions from our clients about the possible impacts of COVID-19 on conveyancing transactions. We have considered the guidance from our governing body and our approach is based on guidance issued by the Law Society.
The issues raised have included potential:
- requests for properties to be decontaminated
- refusal to vacate on completion because a seller or a tenant are in isolation
- failure or disruption to parts of the banking system (such as CHAPS)
- inability to obtain search results, or delays with search results if people are not available to carry out the searches (for instance, council offices running on skeleton staff)
- reluctance on the part of removal company employees to enter properties
- issues with mortgage lending surveys/physical valuations as not all valuers can visit properties and inspect them thoroughly. “Desktop” valuations and “drive-bys” are still taking place as far as we are aware.
- some bridging and commercial lenders have withdrawn from the market (if they source their funding from investors (P2P lending), others are continuing to lend but with a slightly lower loan to value.
What everyone wants to understand (and ideally control) is who bears the risk in various situations.
Before exchange of contracts (sales and purchases)
We expect things to be “business as usual”, and we will assess things on a case by case basis to see if any additional clauses or contract terms are required.
We do not think that we can assess the position sufficiently to attempt to provide any suitable clauses for such a wide range of potential situations and the approach might change if there is actually a COVID-19 illness present on the buyer’s or seller’s side.
Clients may wish to negotiate new provisions to suit their individual circumstances. For instance, if illness becomes an issue or if they are worried about the impact on raising finance, property valuations or sticking to deadlines, we will discuss these with clients on a case by case basis.
Timescales for obtaining Local Authority searches are slightly longer but the search company that we use are very reliable and have been turning search results around very quickly in the circumstances. They are not in control of certain councils where official
searches have to be obtained as some councils are short staffed. There are no issues with personal/regulated searches which most high street residential lenders accept.
After exchange of contracts and post-auction where auction contracts are signed, and a deposit is paid to the auctioneer
If completion does not take place after contracts have exchanged due to COVID-19, the parties who are unable to complete will be in default; no matter what the reason is, i.e. unable to obtain finance.
The contract provisions relating to default will apply unless the non-defaulting party takes a ‘good faith’ view.
If the transaction forms part of a chain of transactions, it may not be possible to take such a view without incurring a penalty and the defaulting part will face financial consequences.
Delaying or withdrawing
We cannot provide clients with guidance on whether to delay or withdraw from a transaction. This is a matter for clients to decide on based on their own individual financial or personal circumstances. We cannot predict how long the measures which have been put in place by the Government will last for or what impact it will have on the property market.
By proceeding with your transaction, whether it is a purchase or a refinance, you will be acknowledging that you have considered and accepted the following:
- That you have considered the risks posed to your business or employment by the requirements for social distancing and the need for quarantine;
- That you have contingency plans which may be required in order to ensure that you can continue to fulfil your obligations to your mortgage lender (i.e. repaying the loan in full by the repayment date);
- That you are aware of your obligations under the terms of your mortgage; and
- That you still wish to proceed to drawdown the mortgage and complete on your transaction.
Our working arrangements
Business is as usual for us. Our contingency arrangements have been robust and our staff are able to work remotely.
We will only see clients face to face where it is strictly necessary so please do ensure you have an appointment before visiting us.
If it becomes necessary for members of our team to take leave due to illness then we have arrangements in place to provide cover and will deal with matters; giving priority to those requiring urgent exchange or completion. In all cases, we will do what we can to minimise disruption.
COVID-19 Conveyancing Guidance
Ola Leslie Solicitors